VAT could be used to strengthen social security in Mozambique – researcher

2:47 CAT | 17 Jul 2019

File photo: O País

Mozambican researcher António Francisco on Tuesday suggested that part of Mozambique’s Value Added Tax (VAT) income could be channelled into social security, with a view to reducing poverty and inequality in the country.

“We should be aware that there are people who do not pay [Social Security] directly [through wages], but contribute to the economy through VAT. Part of that VAT could be indirectly returned to those over 60 years of age,” Francisco, a professor at Eduardo Mondlane University (UEM), Mozambique’s largest and oldest, explained.

Speaking in Maputo yesterday at the conference on “Poverty, inequalities and development models for the country”, Francisco explained that the state collects direct revenue through salaries, and indirect revenue through VAT.

The overwhelming majority of Mozambicans have no wages to contribute to social security, but do contribute to the economy through VAT.

“VAT is already being collected, so why not take 2% or 3% to capitalise and give back to the elderly when they stop working?” he asks.

António Francisco also explained that Mozambique’s social protection system was built after a model designed to suit formal economies, which is not the case here.

“To develop the social protection system adapted to this country, we have to create indirect mechanisms, so as to deliver (social benefits) to people who do not pay in, because they have no salary,” he said.

The current system, he says, “abandons” and “humiliates” the elderly.

And he leaves a question: “Do you really give 300 meticais [US$4.82] from time to time to an elderly person who has contributed to the economy by paying VAT?”

The United Nations Sustainable Development Goals (Agenda 2030) urge us “not leave anyone behind”, but Mozambique leaves the majority behind, he added.

“The only ones who are protected are those who have wages. The system is discriminatory and non-inclusive, we should devise an inclusive system adapted to the economy we actually have,” said the UEM professor.